WASHINGTON-The world's financial leaders started the year worried about China's decelerating economy dragging the world into another major crisis. Now, they are breathing a small sigh of relief.

Finance ministers, central bankers and other top officials gathering here in recent days said Beijing's moves to stabilize its economy have temporarily eased global fears tied to the world's No. 2 economy.

"There was not the same level of anxiety," said International Monetary Fund Managing Director Christine Lagarde.

Uncertainty about China had helped trigger a series of market squalls over the past year-prompting finance chiefs from around the world to seek assurances that Beijing's leaders would get a firmer grip on their economy.

But in meetings of the IMF and World Bank through Sunday in Washington, officials lauded China's recent efforts and pointed to a calming of global markets. "There's a lot more comfort now in the ability of China to keep demand at a certain level that would foster growth," Mexico's Finance Minister Luis Videgaray said in an interview.

U.S. Treasury Secretary Jacob Lew said a new set of policies unveiled by China's National People's Congress last month "addressed some of the core issues, including the very significant challenge of dealing with excess capacity in their economy."

"There was a broad sense that the policies announced are important, and there's a broad hope that those policies will be implemented effectively and quickly," Mr. Lew said.

The IMF remains cautious about China's economic outlook. It recently upgraded China's growth forecast for this year by 0.2 percentage point to 6.5% as a strengthening service sector compensated for a downturn in manufacturing. But the Washington-based fund said Beijing's plans to boost output and overhaul its economy aren't sufficient to address long-term growth concerns.

To its credit, the Journal does express concern over how China stabilized its and the world's economy. But that's down in the "journalistic balance" section, while the headline and first few paragraphs set the overall optimistic (or at least relieved) tone. The casual reader is thus left with a sense that progress is being made.

But that's emphatically not the case. All China did was borrow a bunch of money and spend it, and it's left to the sound money community to figure this out. Doug Noland in his Credit Bubble Bulletin of course gets it:

Rather than the bust that appeared likely in 2016's initial weeks, the first quarter witnessed record Chinese Credit expansion. Friday data showed Chinese March total social financing jumping $360 billion (led by a surge in bank lending). This was somewhat less than January's incredible $520 billion expansion, though it did push Q1 Credit growth above $1.0 TN (historic).

Not long ago Chinese officials had set their sights on reining in rampant Credit growth. Having clearly reversed course, Credit expanded during the quarter at a blistering almost 20%. This compares to its recent official target of 13% and China's GDP target of 6.5-7.0%. In such a circumstance, what is the prognosis for Chinese currency stability? Uncharted Territory.

Keep in mind that Chinese system Credit ("total social financing") surged 12.4% in 2015, or almost $2.4 TN - a massive amount of Credit still insufficient to levitate global energy and commodity prices. The hard landing scenario - appearing increasingly probable back in January and February - would potentially see a significant slowing, or even halt, to the Chinese Credit boom.

When China reported its economic data dump last night which was modestly better than expected (one has to marvel at China's phenomenal ability to calculate its GDP just two weeks after the quarter ended - not even the Bureau of Economic Analysis is that fast), the investing community could finally exhale: after all, the biggest source of "global" instability for the Fed appears to have been neutralized.

But what was the reason for this seeming halt to China's incipient hard landing? The answer was in the secondary data that was reported alongside the primary economic numbers: the March new loan and Total Social Financing report.

As the PBOC reported last night, Chinese banks made 1.37 trillion yuan ($211.23 billion) in new local-currency loans in March, well above analyst expectations, as the central bank scrambled to keep the economy engorged with new loans "to keep policy accommodative to underpin the slowing economy" as Reuters put it. This was up from February's 726.6 billion yuan but off a record of 2.51 trillion yuan extended in January. Outstanding yuan loans grew 14.7 percent by month-end on an annual basis, versus expectations of 14.5 percent.

But it wasn't the total loan tally that is the key figure tracking China's credit largesse: for that one has to look at the total social financing, which in just the month of March rose to 2.34 trillion yuan, the equivalent of more than a third of a trillion in dollars!

And there is your answer, because if one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China's economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing "debt reform." Quite the contrary, China has once again resorted to the old "growth" model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.

And to put it all together, the PBOC also reported that the broad M2 money supply measure grew 13.4% in March from a year earlier, or precisely double the rate of growth of GDP. This means that it took two dollars in new loans to create one dollar of GDP growth.

With China's debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?

So it's not a question of whether everything is back to "normal," but when it all falls back apart. And that might be pretty soon. From yesterday's Bloomberg:

Spooked by a fresh wave of defaults at state-owned enterprises, investors in China's yuan-denominated company notes have driven up yields for nine of the past 10 days and triggered the biggest selloff in onshore junk debt since 2014. Local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor's is cutting its assessment of Chinese firms at a pace unseen since 2003.

While bond yields in China are still well below historical averages, a sustained increase in borrowing costs could threaten an economy that's more reliant on cheap credit than ever before. The numbers suggest more pain ahead: Listed firms' ability to service their debt has dropped to the lowest since at least 1992, while analysts are cutting profit forecasts for Shanghai Composite Index companies by the most since the global financial crisis.

"The spreading of credit risks is only at its early stage in China," said Qiu Xinhong, a Shenzhen-based money manager at First State Cinda Fund Management Co. "Many people have turned bearish."

What's interesting about this story is that the unraveling of China's bond market - and by extension the rest of its and the world's economy - will, when it comes, be a surprise to most people because no one told them that China's stabilization was a debt-based fiction.

When you borrow too much money, it always goes the same way: good times while you're spending the proceeds and a nightmare when your creditors demand repayment. For 40 years, the world has been repeating the same cycle and for all that time the markets have been enthused by the first stage, only to be crushed by the second.

One could make the case that the coming carnage will be the fault of the enablers (banks, stock and bond speculators, gullible consumers) and that they'll just be getting what they deserve.

Unfortunately, in the last group - consumers - are a lot of people who don't deserve to be sucked down with the supposedly more knowledgeable financial pros. But they always are.